Contract

Exhibit 10.8 AKSYS, LTD. NOTICE OF TRANCHE A STOCK OPTION AWARDGrantee’s Name and Address: Howard J. Lewin 6104 Kennedy Drive Chevy Chase, MD 20815 You (the “Grantee”) have been granted a Tranche A option (the “Option”) topurchase shares of Common Stock of Aksys, Ltd. (the “Company”), subject to theterms and conditions of this Notice of Stock Option Award (the “Notice”), theStock Option Award Agreement (the “Option Agreement”) attached hereto, and theexecutive employment agreement between the Grantee and the Company, dated June23, 2006 (the “Employment Agreement”), as follows. Unless otherwise definedherein, the terms defined in the Option Agreement shall have the same definedmeanings in this Notice.Date of Award June 23, 2006Vesting Commencement Date June 23, 2006Exercise Price per Share 0.7644Total Number of Shares Subjectto the Option (the “Shares”) 1,200,000 SharesTotal Exercise Price $917,280Type of Option Non-Qualified Stock OptionExpiration Date: June 23, 2016Post-Termination Vesting andExercise Period: As set forth in Section 5 of the Option AgreementVesting Schedule: Subject to the Grantee’s Continuous Service and other limitations set forthin this Notice, the Option Agreement and the Employment Agreement, the Optionmay be exercised, in whole or in part, in accordance with the followingschedule: Three hundred thousand (300,000) Shares of the Option shall vest on thefirst anniversary of the Vesting Commencement Date and the remaining ninehundred thousand (900,000) Shares shall vest in thirty-six (36) equal monthlyinstallments thereafter. In the event the Grantee’s Continuous Service terminates without Cause orby the Grantee with Good Reason, the outstanding Shares subject to the Optionshall continue to vest for an additional six (6) months from the date of suchtermination. 1 During any authorized leave of absence, the vesting of the Option asprovided in this schedule shall be suspended after the leave of absence exceedsa period of three (3) months. Vesting of the Option shall resume upon theGrantee’s termination of the leave of absence and return to service to theCompany or a Related Entity. The Vesting Schedule of the Option shall beextended by the length of the suspension. IN WITNESS WHEREOF, the Company and the Grantee have executed this Noticeand agree that the Option is to be governed by the terms and conditions of thisNotice and the Option Agreement. Aksys, Ltd., a Delaware corporation By: /s/ ———————————— Title: ———————————THE GRANTEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE OR THE OPTIONAGREEMENT SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDSOR CONTINUATION OF THE GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE INANY WAY WITH THE GRANTEE’S RIGHT OR THE RIGHT OF THE COMPANY OR RELATED ENTITYTO WHICH THE GRANTEE PROVIDES SERVICES TO TERMINATE THE GRANTEE’S CONTINUOUSSERVICE, WITH OR WITHOUT CAUSE. The Grantee acknowledges receipt of a copy of the Option Agreement, andrepresents that he or she is familiar with the terms and provisions thereof, andhereby accepts the Option subject to all of the terms and provisions hereof andthereof. The Grantee has reviewed this Notice and the Option Agreement in theirentirety, has had an opportunity to obtain the advice of counsel prior toexecuting this Notice, and fully understands all provisions of this Notice andthe Option Agreement. The Grantee hereby agrees that all questions ofinterpretation and administration relating to this Notice and the OptionAgreement shall be resolved by the Board in accordance with Section 13 of theOption Agreement. The Grantee further agrees to the venue selection and waiverof a jury trial in accordance with Section 14 of the Option Agreement. TheGrantee further agrees to notify the Company upon any change in the residenceaddress indicated in this Notice.Dated: 6/23/06 Signed: /s/ —————————— ——————————– Grantee 2 AKSYS, LTD. STOCK OPTION AWARD AGREEMENT 1. Grant of Option. Aksys, Ltd., a Delaware corporation (the “Company”),hereby grants to the Grantee (the “Grantee”) named in the Notice of Stock OptionAward (the “Notice”), an option (the “Option”) to purchase the Total Number ofShares of Common Stock subject to the Option (the “Shares”) set forth in theNotice, at the Exercise Price per Share set forth in the Notice (the “ExercisePrice”) subject to the terms and provisions of this Stock Option Award Agreement(the “Option Agreement”), the Notice and the executive employment agreementbetween the Grantee and the Company, dated June 23, 2006 (the “EmploymentAgreement”), which are incorporated herein by reference. 2. Exercise of Option. (a) Right to Exercise. The Option shall be exercisable during its termin accordance with the Vesting Schedule set out in the Notice and with theapplicable provisions of this Option Agreement. (b) Method of Exercise. The Option shall be exercisable by delivery ofan exercise notice (a form of which is attached as Exhibit A) or by such otherprocedure as specified from time to time by the Board which shall state theelection to exercise the Option, the whole number of Shares in respect of whichthe Option is being exercised, and such other provisions as may be required bythe Board. The exercise notice shall be delivered in person, by certified mail,or by such other method (including electronic transmission) as determined fromtime to time by the Board to the Company accompanied by payment of the ExercisePrice. The Option shall be deemed to be exercised upon receipt by the Company ofsuch notice accompanied by the Exercise Price, which, to the extent selected,shall be deemed to be satisfied by use of the broker-dealer sale and remittanceprocedure or the net exercise procedure to pay the Exercise Price provided inSections 3(d) and 3(e) below. (c) Taxes. No Shares will be delivered to the Grantee or other personpursuant to the exercise of the Option until the Grantee or other person hasmade arrangements acceptable to the Board for the satisfaction of applicableincome tax and employment tax withholding obligations, including, withoutlimitation, obligations incident to the receipt of Shares. Upon exercise of theOption, the Company or the Grantee’s employer may offset or withhold (from anyamount owed by the Company or the Grantee’s employer to the Grantee) or collectfrom the Grantee or other person an amount sufficient to satisfy such taxwithholding obligations. 3. Method of Payment. Payment of the Exercise Price shall be made by any ofthe following, or a combination thereof, at the election of the Grantee;provided, however, that such exercise method does not then violate anyApplicable Law and, provided further, that the portion of the Exercise Priceequal to the par value of the Shares must be paid in cash or other legalconsideration permitted by the Delaware General Corporation Law: (a) cash; 1 (b) check; (c) surrender of Shares or delivery of a properly executed form ofattestation of ownership of Shares as the Board may require which have a FairMarket Value on the date of surrender or attestation equal to the aggregateExercise Price of the Shares as to which the Option is being exercised,provided, however, that Shares acquired under any other equity compensation planor agreement of the Company must have been held by the Grantee for a period ofmore than six (6) months (and not used for another award exercise by attestationduring such period); (d) payment through a broker-dealer sale and remittance procedurepursuant to which the Grantee (i) shall provide written instructions to aCompany-designated brokerage firm to effect the immediate sale of some or all ofthe purchased Shares and remit to the Company sufficient funds to cover theaggregate exercise price payable for the purchased Shares and (ii) shall providewritten directives to the Company to deliver the certificates for the purchasedShares directly to such brokerage firm in order to complete the saletransaction; or (e) unless such exercise would constitute a violation of anyApplicable Laws as determined by the Board in its sole discretion, paymentthrough a “net exercise” such that, without the payment of any funds, theGrantee may exercise the Option and receive the net number of Shares equal to(i) the number of Shares as to which the Option is being exercised, multipliedby (ii) a fraction, the numerator of which is the Fair Market Value per Shareless the Exercise Price per Share, and the denominator of which is such FairMarket Value per Share (the net number of Shares received shall be rounded downto the nearest whole number of Shares). 4. Restrictions on Exercise. The Option may not be exercised if theissuance of the Shares subject to the Option upon such exercise would constitutea violation of any Applicable Laws. If the exercise of the Option within theapplicable time periods set forth in Section 5, 6 and 7 of this Option Agreementis prevented by the provisions of this Section 4, the Option shall remainexercisable until one (1) month after the date the Grantee is notified by theCompany that the Option is exercisable, but in any event no later than theExpiration Date set forth in the Notice. 5. Termination or Change of Continuous Service. (a) Subject to Section 17 below, in the event the Grantee’s ContinuousService terminates without Cause or by the Grantee with Good Reason, (i) theoutstanding Shares subject to the Option shall continue to vest for anadditional six (6) months from the date of such termination (also the”Termination Date”), and (ii) the Grantee shall have twelve (12) months from theTermination Date to exercise any vested Shares subject to the Option. (b) Subject to Section 17 below, in the event the Grantee’s ContinuousService terminates for Good Reason following a Change of Control of the Company,the Grantee shall have twelve (12) months from the Termination Date to exerciseany vested Shares subject to the Option. 2 (c) In the event of termination of the Grantee’s Continuous Servicefor Cause or by the Grantee without Good Reason, the Grantee shall have thirty(30) days from the Termination Date to exercise any vested Shares subject to theOption. (d) In no event, however, shall the Option be exercised later than theExpiration Date set forth in the Notice. In the event of the Grantee’s change instatus from Employee, Director or Consultant to any other status of Employee,Director or Consultant, the Option shall remain in effect and the Option shallcontinue to vest in accordance with the Vesting Schedule set forth in theNotice. Except as provided in Sections 6 and 7 below, to the extent that theOption was unvested on the Termination Date, or if the Grantee does not exercisethe vested portion of the Option within the Post-Termination Exercise Period,the Option shall terminate. 6. Disability of Grantee. In the event the Grantee’s Continuous Serviceterminates as a result of his or her Disability, the Grantee may, but onlywithin twelve (12) months commencing on the Termination Date (but in no eventlater than the Expiration Date), exercise the portion of the Option that wasvested on the Termination Date. To the extent that the Option was unvested onthe Termination Date, or if the Grantee does not exercise the vested portion ofthe Option within the time specified herein, the Option shall terminate. 7. Death of Grantee. In the event of the termination of the Grantee’sContinuous Service as a result of his or her death, or in the event of theGrantee’s death during the Post-Termination Exercise Period or during the twelve(12) month period following the Grantee’s termination of Continuous Service as aresult of his or her Disability, the person who acquired the right to exercisethe Option pursuant to Section 8 may exercise the portion of the Option that wasvested at the date of termination within twelve (12) months commencing on thedate of death (but in no event later than the Expiration Date). To the extentthat the Option was unvested on the date of death, or if the vested portion ofthe Option is not exercised within the time specified herein, the Option shallterminate. 8. Transferability of Option. The Option may not be transferred in anymanner other than by will or by the laws of descent and distribution, provided,however, that the Option may be transferred during the lifetime of the Granteeto the extent and in the manner determined by the Board. Notwithstanding theforegoing, the Grantee may designate one or more beneficiaries of the Grantee’sOption in the event of the Grantee’s death on a beneficiary designation formprovided by the Board. Following the death of the Grantee, the Option, to theextent provided in Section 7, may be exercised (a) by the person or personsdesignated under the deceased Grantee’s beneficiary designation or (b) in theabsence of an effectively designated beneficiary, by the Grantee’s legalrepresentative or by any person empowered to do so under the deceased Grantee’swill or under the then applicable laws of descent and distribution. The terms ofthe Option shall be binding upon the executors, administrators, heirs,successors and transferees of the Grantee. 9. Term of Option. The Option must be exercised no later than theExpiration Date set forth in the Notice or such earlier date as otherwiseprovided herein. After the Expiration Date or such earlier date, the Optionshall be of no further force or effect and may not be exercised. 3 10. Tax Consequences. The Grantee may incur tax liability as a result ofthe Grantee’s purchase or disposition of the Shares. THE GRANTEE SHOULD CONSULTA TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES. 11. Entire Agreement: Governing Law. The Notice, this Option Agreement, andthe Employment Agreement constitute the entire agreement of the parties withrespect to the subject matter hereof and supersede in their entirety all priorundertakings and agreements of the Company and the Grantee with respect to thesubject matter hereof, and may not be modified adversely to the Grantee’sinterest except by means of a writing signed by the Company and the Grantee.Nothing in the Notice, this Option Agreement, or the Employment Agreement(except as expressly provided therein) is intended to confer any rights orremedies on any persons other than the parties. The Notice, this OptionAgreement, and the Employment Agreement are to be construed in accordance withand governed by the internal laws of the State of Illinois without giving effectto any choice of law rule that would cause the application of the laws of anyjurisdiction other than the internal laws of the State of Illinois to the rightsand duties of the parties. Should any provision of the Notice or this OptionAgreement be determined to be illegal or unenforceable, such provision shall beenforced to the fullest extent allowed by law and the other provisions shallnevertheless remain effective and shall remain enforceable. 12. Construction. The captions used in the Notice and this Option Agreementare inserted for convenience and shall not be deemed a part of the Option forconstruction or interpretation. Except when otherwise indicated by the context,the singular shall include the plural and the plural shall include the singular.Use of the term “or” is not intended to be exclusive, unless the context clearlyrequires otherwise. 13. Administration and Interpretation. Any question or dispute regardingthe administration or interpretation of the Notice or this Option Agreementshall be submitted by the Grantee or by the Company to the Board. The resolutionof such question or dispute by the Board shall be final and binding on allpersons. 14. Venue and Waiver of Jury Trial. The Company, the Grantee, and theGrantee’s assignees pursuant to Section 8 (the “parties”) agree that any suit,action, or proceeding arising out of or relating to the Notice or this OptionAgreement shall be brought in the United States District Court for the NorthernDistrict of Illinois (or should such court lack jurisdiction to hear suchaction, suit or proceeding, in a Illinois state court in Cook County) and thatthe parties shall submit to the jurisdiction of such court. The partiesirrevocably waive, to the fullest extent permitted by law, any objection theparty may have to the laying of venue for any such suit, action or proceedingbrought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE ORMAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one ormore provisions of this Section 14 shall for any reason be held invalid orunenforceable, it is the specific intent of the parties that such provisionsshall be modified to the minimum extent necessary to make it or its applicationvalid and enforceable. 15. Notices. Any notice required or permitted hereunder shall be given inwriting and shall be deemed effectively given upon personal delivery, upondeposit for delivery by an internationally recognized express mail courierservice or upon deposit in the United States mail by certified mail (if theparties are within the United States), with postage and fees prepaid, 4addressed to the other party at its address as shown in these instruments, or tosuch other address as such party may designate in writing from time to time tothe other party. 16. Adjustments Upon Changes in Capitalization. Subject to any requiredaction by the stockholders of the Company, the number of Shares covered by theOption, the exercise price of the Option, as well as any other terms that theBoard determines require adjustment shall be proportionately adjusted for (i)any increase or decrease in the number of issued Shares resulting from a stocksplit, reverse stock split, stock dividend, combination or reclassification ofthe Shares, or similar transaction affecting the Shares, (ii) any other increaseor decrease in the number of issued Shares effected without receipt ofconsideration by the Company, or (iii) as the Board may determine in itsdiscretion, any other transaction with respect to Common Stock including acorporate merger, consolidation, acquisition of property or stock, separation(including a spin-off or other distribution of stock or property),reorganization, liquidation (whether partial or complete) or any similartransaction; provided, however that conversion of any convertible securities ofthe Company shall not be deemed to have been “effected without receipt ofconsideration.” Such adjustment shall be made by the Board and its determinationshall be final, binding and conclusive. Except as the Board determines, noissuance by the Company of shares of stock of any class, or securitiesconvertible into shares of stock of any class, shall affect, and no adjustmentby reason hereof shall be made with respect to, the number or price of Sharessubject to the Option. 17. Change of Control. Immediately prior to the specified effective date ofa Change of Control, any unvested Shares subject to the Option shall immediatelyvest in full. Effective upon the consummation of a Change of Control, the Optionshall terminate. However, the Option shall not terminate to the extent it isAssumed in connection with the Change of Control. 18. Definitions. As used herein, the following definitions shall apply: (a) “Affiliate” and “Associate” shall have the respective meaningsascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. (b) “Applicable Laws” means the legal requirements applicable to theOption, if any, under applicable provisions of federal securities laws, statecorporate and securities laws, the Code, the rules of any applicable stockexchange or national market system, and the rules of any non-U.S. jurisdictionapplicable to Options granted to residents therein. (c) “Assumed” means that pursuant to a Change of Control either (i)the Option is expressly affirmed by the Company or (ii) the contractualobligations represented by the Option are expressly assumed (and not simply byoperation of law) by the successor entity or its Parent in connection with theChange of Control with appropriate adjustments to the number and type ofsecurities of the successor entity or its Parent subject to the Option and theexercise or purchase price thereof which at least preserves the compensationelement of the Option existing at the time of the Change of Control asdetermined in accordance with the instruments evidencing the agreement to assumethe Option. 5 (d) “Board” means the Board of Directors of the Company and shallinclude any committee of the Board or Officer of the Company to which the Boardhas delegated its authority under this Agreement. (e) “Cause” means (i) the Grantee’s conviction or plea of nolocontendere of a felony or any other crime involving dishonesty, breach of trust,or physical harm to any person (excluding traffic violations that do not relateto driving while intoxicated or driving under the influence); (ii) the Granteehas willfully engaged in conduct that is in bad faith and materially injuriousto the Company, including but not limited to, misappropriation of trade secrets,fraud or embezzlement; or (iii) any material willful breach by the Grantee ofthe Employment Agreement that causes material damage to the Company. (f) “Change of Control” means a change in ownership or control of theCompany effected through a merger, consolidation or acquisition by any person orrelated group of persons (other than an acquisition by the Company or by aCompany-sponsored employee benefit plan or by a person or persons that directlyor indirectly controls, is controlled by, or is under common control with, theCompany) of beneficial ownership (within the meaning of Rule 13d-3 of theExchange Act) of securities possessing more than fifty percent of the totalcombined voting power of the outstanding securities of the Company.Notwithstanding anything else contained herein to the contrary, in no eventshall a Change of Control be deemed to occur by reason of (i) a distribution ofthe Company’s Common Stock held by Durus Life Sciences Master Fund Ltd (“Durus”)to its investors, partners or members, whether as dividend or otherwise, of allor any portion of the shares of Common Stock held, directly or indirectly, byDurus or (ii) a sale of all or any portion of the Company’s Common Stock held,directly or indirectly, by Durus in an underwritten public offering (including,without limitation, a sale of securities of holdings in an underwritten publicoffering), unless following such distribution or sale any person or relatedgroup of persons, other than Durus or its affiliates, possess more than fiftypercent of the total combined voting power of the outstanding securities of theCompany. (g) “Code” means the Internal Revenue Code of 1986, as amended. (h) “Common Stock” means the common stock of the Company. (i) “Company” means Aksys, Ltd., a Delaware corporation. (j) “Consultant” means any person (other than an Employee or aDirector, solely with respect to rendering services in such person’s capacity asa Director) who is engaged by the Company or any Related Entity to renderconsulting or advisory services to the Company or such Related Entity. (k) “Continuous Service” means that the provision of services to theCompany or a Related Entity in any capacity of Employee, Director or Consultantis not interrupted or terminated. In jurisdictions requiring notice in advanceof an effective termination as an Employee, Director or Consultant, ContinuousService shall be deemed terminated upon the actual cessation of providingservices to the Company or a Related Entity notwithstanding any required noticeperiod that must be fulfilled before a termination as an Employee, Director orConsultant can be effective under Applicable Laws. A Grantee’s ContinuousService shall be 6deemed to have terminated either upon an actual termination of ContinuousService or upon the entity for which the Grantee provides services ceasing to bea Related Entity. Continuous Service shall not be considered interrupted in thecase of (i) any approved leave of absence, (ii) transfers among the Company, anyRelated Entity, or any successor, in any capacity of Employee, Director orConsultant, or (iii) any change in status as long as the individual remains inthe service of the Company or a Related Entity in any capacity of Employee,Director or Consultant (except as otherwise provided in the Award Agreement). Anapproved leave of absence shall include sick leave, military leave, or any otherauthorized personal leave. (l) “Director” means a member of the Board or the board of directorsof any Related Entity. (m) “Disability” means as defined under the long-term disabilitypolicy of the Company or the Related Entity to which the Grantee providesservices regardless of whether the Grantee is covered by such policy. If theCompany or the Related Entity to which the Grantee provides service does nothave a long-term disability plan in place, “Disability” means that a Grantee isunable to carry out the responsibilities and functions of the position held bythe Grantee by reason of any medically determinable physical or mentalimpairment for a period of not less than one hundred twenty (120) consecutivedays or more than one hundred eighty (180) days in any twelve-month period. AGrantee will not be considered to have incurred a Disability unless he or shefurnishes proof of such impairment sufficient to satisfy the Board in itsdiscretion. (n) “Employee” means any person, including an Officer or Director, whois in the employ of the Company or any Related Entity, subject to the controland direction of the Company or any Related Entity as to both the work to beperformed and the manner and method of performance. The payment of a director’sfee by the Company or a Related Entity shall not be sufficient to constitute”employment” by the Company. (o) “Exchange Act” means the Securities Exchange Act of 1934, asamended. (p) “Fair Market Value” means, as of any date, the value of CommonStock determined as follows: (i) If the Common Stock is listed on one or more establishedstock exchanges or national market systems, including without limitation TheNasdaq Global Select Market, The Nasdaq Global Market or The Nasdaq CapitalMarket of The Nasdaq Stock Market, its Fair Market Value shall be the closingsales price for such stock (or the closing bid, if no sales were reported) asquoted on the principal exchange or system on which the Common Stock is listed(as determined by the Board) on the date of determination (or, if no closingsales price or closing bid was reported on that date, as applicable, on the lasttrading date such closing sales price or closing bid was reported), as reportedin The Wall Street Journal or such other source as the Board deems reliable; (ii) If the Common Stock is regularly quoted on an automatedquotation system (including the OTC Bulletin Board) or by a recognizedsecurities dealer, its Fair Market Value shall be the closing sales price forsuch stock as quoted on such system or by 7such securities dealer on the date of determination, but if selling prices arenot reported, the Fair Market Value of a share of Common Stock shall be the meanbetween the high bid and low asked prices for the Common Stock on the date ofdetermination (or, if no such prices were reported on that date, on the lastdate such prices were reported), as reported in The Wall Street Journal or suchother source as the Board deems reliable; or (iii) In the absence of an established market for the CommonStock of the type described in (i) and (ii), above, the Fair Market Valuethereof shall be determined by the Board in good faith. (q) “Good Reason” means, (i) absent a Change of Control, as defined by paragraph 18(f),having a material diminution in, or adverse alteration to, the Grantee’s title,position, or duties, including no longer serving as the highest rankingexecutive officer in the Company, provided that (A) the Grantee provides theCompany with written notice of the event constituting Good Reason within sixty(60) days of such event and the Grantee provides the Company with a period ofsixty (60) days to cure such event, (B) the appointment by the Company of aChief Operating Officer, Chief Administrative Officer or similar officer shallnot constitute a material diminution in, or adverse alteration to, the Grantee’stitle, position, or duties, provided that the Grantee continues to serve as thehighest ranking executive officer in the Company following any such appointmentand (C) if such material diminution occurs within the first year of theGrantee’s employment with the Company, any resignation by the Grantee as resultof such material diminution shall only be for Good Reason if (1) the Grantee hasfirst provided the Company with the written notice and cure opportunity providedin clause (A) above, and (2) such resignation occurs on or after the first yearof the Grantee’s employment with the Company; and (ii) upon or following a Change of Control, as defined byparagraph 18(f) herein, either (A) the Grantee’s employment is terminated by theCompany not for Cause within twelve (12) months following a Change of Control,(B) the Grantee no longer is the Chief Executive Officer of a publicly-tradedcompany immediately following a Change of Control, (C) the Grantee is not amember of the Board immediately following a Change of Control, (D) the Granteedoes not directly report to the Board immediately following a Change of Control,or (E) the Grantee provides written notice to the Company of either of thefollowing events within sixty (60) days of such event and the Grantee providesthe Company with a period of sixty (60) days to cure such event (which eventremains uncured following such period), provided that each such event iseffected by the Company without the consent of the Grantee and occurs within six(6) months following a Change of Control: (1) a change in the Grantee’s jobtitle at the Company or (2) a material reduction in the Grantee’s base salary. (r) “Non-Qualified Stock Option” means an Option not intended toqualify as an incentive stock option within the meaning of Section 422 of theCode. (s) “Officer” means a person who is an officer of the Company or aRelated Entity within the meaning of Section 16 of the Exchange Act and therules and regulations promulgated thereunder. 8 (t) “Parent” means a “parent corporation,” whether now or hereafterexisting, as defined in Section 424(e) of the Code. (u) “Related Entity” means any Parent (other than Durus or any relatedinvestment fund) or Subsidiary of the Company and any business, corporation,partnership, limited liability company or other entity in which the Company or aParent (other than Durus or any related investment fund) or a Subsidiary of theCompany holds a substantial ownership interest, directly or indirectly. (v) “Share” means a share of the Common Stock. (w) “Subsidiary” means a “subsidiary corporation,” whether now orhereafter existing, as defined in Section 424(f) of the Code. END OF AGREEMENT 9 EXHIBIT A EXERCISE NOTICEAksys, Ltd.[address]Attention: Secretary 1. Effective as of today, ______________, ___ the undersigned (the”Grantee”) hereby elects to exercise the Grantee’s option to purchase___________ shares of the Common Stock (the “Shares”) of Aksys, Ltd. (the”Company”) under and pursuant to the Stock Option Award Agreement (the “OptionAgreement”) and Notice of Stock Option Award (the “Notice”) dated______________, ________. Unless otherwise defined herein, the terms defined inthe Option Agreement shall have the same defined meanings in this ExerciseNotice. 2. Representations of the Grantee. The Grantee acknowledges that theGrantee has received, read and understood the Notice and the Option Agreementand agrees to abide by and be bound by their terms and conditions. 3. Rights as Stockholder. Until the stock certificate evidencing suchShares is issued (as evidenced by the appropriate entry on the books of theCompany or of a duly authorized transfer agent of the Company), no right to voteor receive dividends or any other rights as a stockholder shall exist withrespect to the Shares, notwithstanding the exercise of the Option. The Companyshall issue (or cause to be issued) such stock certificate promptly after theOption is exercised. No adjustment will be made for a dividend or other rightfor which the record date is prior to the date the stock certificate is issued,except as provided in Section 16 of the Option Agreement. 4. Delivery of Payment. The Grantee herewith delivers to the Company thefull Exercise Price for the Shares, which, to the extent selected, shall bedeemed to be satisfied by use of the broker-dealer sale and remittance procedureto pay the Exercise Price provided in Section 3(d) of the Option Agreement. 5. Tax Consultation. The Grantee understands that the Grantee may sufferadverse tax consequences as a result of the Grantee’s purchase or disposition ofthe Shares. The Grantee represents that the Grantee has consulted with any taxconsultants the Grantee deems advisable in connection with the purchase ordisposition of the Shares and that the Grantee is not relying on the Company forany tax advice. 6. Taxes. The Grantee agrees to satisfy all applicable non-U.S., federal,state and local income and employment tax withholding obligations and herewithdelivers to the Company the full amount of such obligations or has madearrangements acceptable to the Company to satisfy such obligations. 1 7. Successors and Assigns. The Company may assign any of its rights underthis Exercise Notice to single or multiple assignees, and this agreement shallinure to the benefit of the successors and assigns of the Company. This ExerciseNotice shall be binding upon the Grantee and his or her heirs, executors,administrators, successors and assigns. 8. Construction. The captions used in this Exercise Notice are inserted forconvenience and shall not be deemed a part of this agreement for construction orinterpretation. Except when otherwise indicated by the context, the singularshall include the plural and the plural shall include the singular. Use of theterm “or” is not intended to be exclusive, unless the context clearly requiresotherwise. 9. Administration and Interpretation. The Grantee hereby agrees that anyquestion or dispute regarding the administration or interpretation of thisExercise Notice shall be submitted by the Grantee or by the Company to theBoard. The resolution of such question or dispute by the Board shall be finaland binding on all persons. 10. Governing Law; Severability. This Exercise Notice is to be construed inaccordance with and governed by the internal laws of the State of Illinoiswithout giving effect to any choice of law rule that would cause the applicationof the laws of any jurisdiction other than the internal laws of the State ofIllinois to the rights and duties of the parties. Should any provision of thisExercise Notice be determined by a court of law to be illegal or unenforceable,such provision shall be enforced to the fullest extent allowed by law and theother provisions shall nevertheless remain effective and shall remainenforceable. 11. Notices. Any notice required or permitted hereunder shall be given inwriting and shall be deemed effectively given upon personal delivery, upondeposit for delivery by an internationally recognized express mail courierservice or upon deposit in the United States mail by certified mail (if theparties are within the United States), with postage and fees prepaid, addressedto the other party at its address as shown below beneath its signature, or tosuch other address as such party may designate in writing from time to time tothe other party. 12. Further Instruments. The parties agree to execute such furtherinstruments and to take such further action as may be reasonably necessary tocarry out the purposes and intent of this agreement. 2 13. Entire Agreement. The Notice and the Option Agreement are incorporatedherein by reference and together with this Exercise Notice and the executiveemployment agreement between the Grantee and Company, dated June 23, 2006 (the”Employment Agreement”) constitute the entire agreement of the parties withrespect to the subject matter hereof and supersede in their entirety all priorundertakings and agreements of the Company and the Grantee with respect to thesubject matter hereof, and may not be modified adversely to the Grantee’sinterest except by means of a writing signed by the Company and the Grantee.Nothing in the Notice, the Option Agreement, this Exercise Notice or theEmployment Agreement (except as expressly provided therein) is intended toconfer any rights or remedies on any persons other than the parties.Submitted by: Accepted by:GRANTEE: ASKYS, LTD. By: ———————————– Title:- ————————————- ——————————— (Signature)Address: Address:__________________________________________________________________________ 3